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A volatile economic and consumer spending environment following 2008 had a negative impact on the top-line growth of some companies in the consumer goods sector. As the market rallies investors may be looking to uncover rebound candidates, but they should be wary of troubling accounting trends.

With this in mind, we created the list below by focusing on 2 statistics from the balance sheet, namely the growth in receivables, and inventories.

Although receivables are considered to be an asset, it becomes a risk when receivables grow and revenues decline. We looked through more than 30 balance sheets to find those with negative trends in revenue relative to accounts receivable, with slower growth in revenue year-over-year than growth in accounts receivable, as well as receivables comprising a larger portion of current assets.

Receivables represent the portion of revenue not yet collected, so the smaller the portion of revenue and current assets, the better.

We then moved to looking at growth in quarterly revenue slower than growth in quarterly inventory year-over-year. We also looked for companies with quarterly inventory increasing as a percent of current assets.

When revenue is growing slower than inventory, it may indicate that the company is having trouble selling its inventory - although this might just indicate inventory building or a change in sales policies.

We were left with 5 companies.

Interactive Chart: Press Play to compare changes in analyst changes over the last two years for the three stocks mentioned below.

A Closer Look

We looked at Federal-Mogul Corp. (NASDAQ:FDML) in more detail. The stock is trading around $6.52 versus its 52 week high of $17.97, down 60% in the past 1-year. On February 27th, 2013, the company reported fourth quarter 2012 earnings per share loss of ($0.42), which missed consensus of $0.07. Also, gross margins and operating margins continued to decline. The weakness in Europe contributed to this underperformance.

More importantly, the company's balance sheet has become a concern with only $467 million in cash and cash equivalents, and $2.7 billion long-term debt. For the full year 2012, the company burnt $486 million in cash. Also, the company has a minimal amount of $163 million in available borrowings under its credit facility. Total contractual obligations of $1.8 billion are due in 2014.

Can a company with troubling accounting signals, and a weak balance sheet survive in the long-run?

Do you think it's time to stay cautious of these stocks? Use the list below as a starting point for your analysis.

The List

1. Boise Inc. (NYSE:BZ): Engages in the manufacture and sale of paper and packaging products.

  • Market cap at $874.39M, most recent closing price at $8.69.
  • Revenue grew by 2.13% during the most recent quarter ($645.18M vs. $631.74M y/y). Accounts receivable grew by 10.1% during the same time period ($267.68M vs. $243.13M y/y). Receivables, as a percentage of current assets, increased from 33.13% to 37.73% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
  • Revenue grew by 2.13% during the most recent quarter ($645.18M vs. $631.74M y/y). Inventory grew by 10.53% during the same time period ($320.97M vs. $290.4M y/y). Inventory, as a percentage of current assets, increased from 39.57% to 45.25% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).

2. Canon Inc. (NYSE:CAJ): Manufactures and sells network digital multifunction devices (MFDs), plain paper copying machines, laser printers, inkjet printers, cameras, and lithography equipments primarily under Canon brand in the Americas, Europe, Asia and Oceania.

  • Market cap at $48.43B, most recent closing price at $36.31.
  • Revenue grew by -1.39% during the most recent quarter ($951,394M vs. $964,757M y/y). Accounts receivable grew by 7.53% during the same time period ($573,375M vs. $533,208M y/y). Receivables, as a percentage of current assets, increased from 24.76% to 27.54% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Revenue grew by -1.39% during the most recent quarter ($951,394M vs. $964,757M y/y). Inventory grew by 15.72% during the same time period ($551,623M vs. $476,704M y/y). Inventory, as a percentage of current assets, increased from 22.14% to 26.49% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).

3. Federal-Mogul Corp. (FDML): Supplies powertrain and safety technologies worldwide.

  • Market cap at $642.85M, most recent closing price at $6.50.
  • Revenue grew by -7.51% during the most recent quarter ($1,602M vs. $1,732M y/y). Accounts receivable grew by 21.34% during the same time period ($1,450M vs. $1,195M y/y). Receivables, as a percentage of current assets, increased from 35.62% to 45.14% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
  • Revenue grew by -7.51% during the most recent quarter ($1,602M vs. $1,732M y/y). Inventory grew by 3.79% during the same time period ($1,041M vs. $1,003M y/y). Inventory, as a percentage of current assets, increased from 29.9% to 32.41% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).

4. Graphic Packaging Holding Company (NYSE:GPK): Provides packaging solutions in the United States, Canada, Central/South America, Europe, and the Asia-Pacific.

  • Market cap at $2.59B, most recent closing price at $7.51.
  • Revenue grew by 0.15% during the most recent quarter ($1,053.3M vs. $1,051.7M y/y). Accounts receivable grew by 14.78% during the same time period ($461.3M vs. $401.9M y/y). Receivables, as a percentage of current assets, increased from 30.72% to 38.34% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).
  • Revenue grew by 0.15% during the most recent quarter ($1,053.3M vs. $1,051.7M y/y). Inventory grew by 12.02% during the same time period ($531.2M vs. $474.2M y/y). Inventory, as a percentage of current assets, increased from 36.25% to 44.15% during the most recent quarter (comparing 3 months ending 2012-12-31 to 3 months ending 2011-12-31).

5. Coca-Cola FEMSA S.A.B de C.V. (NYSE:KOF): Produces, markets, and distributes Coca-Cola trademark beverages and brands.

  • Market cap at $32.45B, most recent closing price at $159.81.
  • Revenue grew by 20.33% during the most recent quarter ($36,193M vs. $30,077M y/y). Accounts receivable grew by 29.5% during the same time period ($7,814M vs. $6,034M y/y). Receivables, as a percentage of current assets, increased from 18.29% to 24.98% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).
  • Revenue grew by 20.33% during the most recent quarter ($36,193M vs. $30,077M y/y). Inventory grew by 36.51% during the same time period ($8,143M vs. $5,965M y/y). Inventory, as a percentage of current assets, increased from 18.08% to 26.03% during the most recent quarter (comparing 3 months ending 2012-09-30 to 3 months ending 2011-09-30).

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

Source: 5 Consumer Goods Stocks With Troubling Accounting Signals